Reinsurance

Utmost good faith

The decision of the Court of Appeal in Assicurazioni Generali SpA v Arab Insurance Group (BSC) [2002] EWCA Civ 1642 is likely to become regarded as a landmark ruling on the relationship between the requirements of materiality and inducement in utmost good faith. The point arose in a complex retrocession context, and much of the reasoning of the Court of Appeal is concerned with factual issues and whether or not there had been false statements relating to the participation of other reinsurers and relating to reserving policy, points which are themselves of some general significance in the reinsurance context. By a majority, the Court of Appeal upheld the decision of Morison J, [2002] Lloyd’s Rep IR 633 , holding that the retrocessionaires had no right to avoid their contract.